UK stock market commentary (April 07, 2014)

European equities are set to slump on the open following the US sell off into the close on Friday. Despite a positive close in Europe on Friday, all that hard work by the bulls is about to be undone and markets are set to open almost exactly where they opened on that morning. Markets have had a very respectable bounce since mid March but momentum is waning as the luke warm out look just isn’t convincing enough for traders to really take things higher.

The nonfarm payrolls data indicated the unemployment rate held at 6.7% amid a gain of 192,000 jobs last month versus estimates for a rise of 199,000 jobs. As an immediate reaction the US equities moved up only to plunge for the rest of the afternoon, ending 151 points down at 1643. The numbers were slightly less than expected but probably enough to keep the plan of 6 more month of QE on track.

It seems the Fed monetary policy is staying on course with a gradually tapering whilst in Europe speculation of easing to fight deflation risks is still being heard. So the shared currency continued its slump against the greenback, losing another 17 pips to 1.3703 and this divergence in monetary policy could accentuate on the short term.

Positive revisions in payrolls for the previous two months and the fact the US still added almost 200,000 jobs last in March overshadowed the forecast was marginally higher. The energy complex’ sentiment was boosted by the fact the biggest oil consuming economy is recovering well, so investors pushed the WTI crude prices 75 cents up to $101.13 a barrel.

Gold investors focused on the fact that unemployment data trailed estimates and rushed into the precious metals. Consequently, gold prices rallied $16.8 to $1303.5 even with the US dollar getting stronger. Overnight, gold was back on the defensive and a retest on the $1300.00 looks quite possible.